The ‘Uber for X’ Fad Will Pass Because Only Uber Is Uber

“Three years from now, we’ll have an on-demand news platform for Millennials. They tap a button on their phones and they get the news delivered right to them, wherever they are,” the editor said enthusiastically. “This is the future of news!”

“Is it an app?” I asked, trying to understand.

“Maybe. The point is that you get the news right away, when you want it, wherever you are,” the exec said.

“So you mean an app,” I pressed. “Yes!” he said. “But more like Uber.”

The mass “Uber for X” excitement is a good example of what happens when we don’t stop to investigate a trend, asking difficult questions and challenging our cherished beliefs. We need to first understand what, exactly, Uber is and what led to entrepreneurs coining that catchphrase. Today, Uber is a wildly successful, six-year-old ride-sharing service that’s now found in most major cities around the world. Anyone who has a valid license and access to a car, who owns a smartphone, and who can pass a criminal background check can become an Uber driver. Riders flag down a driver via a mobile app, which connects to the Uber dispatch and payment platform on the backend. A user’s credit card is stored in the platform, so cash isn’t part of the transaction. Drivers and riders are connected through Uber’s platform, cutting out all of the other parts of the taxicab industry.

Those who use Uber rely on the service for its ease of use, seamless transactions, and customer service. So “Uber for X” has become a kind of shorthand for convenience—a technological solution for any of life’s frustrating, dull tasks, one that either makes them more convenient or automates them completely.

“Uber for X” has become a kind of shorthand for convenience—a technological solution for any of life’s frustrating, dull tasks.

Uber made history in December 2015 when media outlets reported that the company was looking to raise as much as $2.1 billion in its seventh financing round. That would value the company at $62.5 billion and make it the world’s most valuable privately held startup. For context, Facebook, when it went public, was valued at $50 billion and soon made its founder Mark Zuckerberg the sixteenth wealthiest person in the world. Let that sink in for a moment.

Uber isn’t a unicorn. It isn’t a decacorn, either (a company valued over $10 billion). It’s a one-of-a-kind mythological siren, enchanting investors and entrepreneurs, beguiling competitors, and teasing journalists.

With its remarkable success, who wouldn’t want to emulate Uber’s global hegemony? Consider this very short list of startups:

• Wag: Uber for dog walkers
• Coders Clan: Uber for computer coding
• Heal: Uber for doctors
• Minibar: Uber for alcohol
• Animan Robo: Uber for drones
• Eaze: Uber for medical marijuana
• LawTrades: Uber for lawyers
• Plowz: Uber for snow plows
• Shortcut: Uber for haircuts
• Washio: Uber for laundry and dry cleaning
• JetMe: Uber for private jets
• IceCream.io: Uber for ice cream

Uber the company is an undeniable success. But does that necessarily imply that “Uber for X” is a real trend? Or is “Uber for X” merely a red herring, a shiny object in the business, while Uber the company is quietly building a new kind of technology platform that will usher in omnipresent on-demand services of the future? Which parts of the Uber story are worth paying attention to?

To answer these questions, we need to investigate what we think we see so far. Our own experiences and belief bias influence the way we parse any set of facts, and we are further swayed by the milieu of popular sentiment. Maybe “Uber for X” represents an upcoming boom in the sharing economy. Or maybe it’s the opposite: with so many startups, maybe it means that the sharing economy is in a bubble, one that could soon burst.

Let’s go back in time and try to see the world as Uber founder Travis Kalanick did. What trend patterns were emerging?

Let’s forget what we know about the world today and instead pretend like it’s January 2010. America was still rebounding from our Great Recession, which had been sparked by the subprime mortgage crisis. The Bureau of Labor Statistics forecast an ongoing decline in the growth of consumer spending. America’s unemployment rate reached 10 percent, and experts offered a bleak outlook for most job seekers.

We hadn’t seen unemployment climb above 9 percent since the 1981 recession, in which three-quarters of job losses came from goods-producing sectors, like auto manufacturing. This time around, white-collar and public-sector workers were hit hardest. They were teachers, civil servants, sales department managers, journalists, and postal workers. We reached an inflection point, and almost overnight, there were far more people who needed jobs than positions posted by the relatively few companies able and willing to make new hires.

But unlike those who were laid off in 1981, the people who lost their jobs in 2009–2010 had lived through a decade-long dot-com boom. The tech bubble may have burst, but even that implosion couldn’t dampen America’s renewed sense of entrepreneurial spirit. There may not have been jobs available, but a lot of people still needed assistance getting things done. TaskRabbit emerged as an online marketplace for small jobs and tasks. There were no more buyers for bad second (and third, fourth, and fifth) investment properties, but there were rooms to let. Airbnb soon enabled anyone to make a few bucks off of their empty houses, condos, and rooms as a bed-and-breakfast purveyor. The unemployed no longer had disposable income to buy new power tools or designer handbags, but there were neighbors willing to lend their goods—for a fee. SnapGoods and NeighborGoods were platforms allowing communities to rent items to each other.

We can begin to see we had reached an inflection point. Something happened to catalyze a great acceleration in emerging research: the job market tanked, and myriad developers got to work thinking about and tinkering with new kinds of sharing-economy platforms.

In 2010, a lot more people were buying smartphones than those economic indicators would lead us to believe. Even in a down economy with so many people out of work, Apple posted record iPhone sales and what had at that point been its highest earnings in company history. Sales of iPhones, at 14.1 million, were up 91 percent year-over-year.

It seemed like a staggering contradiction, one that could favor Uber. That’s because the Uber platform relied on mobile technology. Would-be riders had to mark their location within an app, which would connect them with a nearby driver, who received the notice on her own mobile phone. The rider’s credit card information was stored in the app, as was the driver’s account–Uber was completely cashless. Once a ride was completed, the total amount would be charged to the stored credit card, and a percentage would be posted to the driver’s account.

In the taxi market, there are three operators: the taxi driver, a dispatch company that facilitates transactions (as well as other logistics and infrastructure, like fleet maintenance and scheduling), and what’s called the “medallion holder.” Medallions are special permits required to own and operate a taxicab, and they’re a requirement in most US cities. Without the official permit, a local government could impose hefty fines.

By the time the medallion idea originated in the 1930s, cabs had become wildly popular in New York City. But medallions weren’t free. By 2010, the onetime cost of a single New York City medallion averaged $775,000 to $850,000. It was less in other cities, including Boston and San Francisco, but not by much. That fee trickled down to drivers, who had to pay the medallion owners $100 or more per shift just for the privilege of working. It could take half the day to break even. Medallion owners had to pay down the debt on the permit, and they also had to pay the dispatch companies.

This is why in crowded metropolises, like New York City, it’s so hard to hail a cab, even in Manhattan, where taxis appear to be everywhere.

By the time Kalanick was pitching Uber to investors, the city’s population had increased to 8.2 million. The city was managing an average of 50 million tourists every single year. And let’s not forget about the 117 million passengers served at New York City’s three airports. Some are tourists, but many are local residents who use cabs to get to and from their flights.

In 1937, guess how many taxi medallions were issued? 11,787. Now, guess how many medallions are in circulation today? Only 13,270.

This is why in crowded metropolises, like New York City, it’s so hard to hail a cab, even in Manhattan, where taxis appear to be everywhere, a rippling blur of yellow with occasional accents of red flashing lights. If you’ve ever tried to hail one of those cabs during what’s known as “shift change”—the dreaded 3 p.m. to 6 p.m. block of reduced service as drivers end and begin their shifts—you’ve no doubt experienced a level of frustration that’s difficult to convey without the assistance of expletives. Same goes when it’s raining in Washington, DC, and you’re trying to get a cab outside of Union Station. Or when it’s snowing in Chicago and you need a ride out of O’Hare.

It’s another contradiction. One would think that a great increased demand would lead to a corresponding supply when it comes to public transit, but that just hasn’t been the case.

Uber is also a workaround for a standard practice, threatening the established orthodoxy. It creates instant competition in a field dominated by a singular monopoly in just about every market. Kalanick wasn’t just building another car service. His ride-sharing idea was, at its core, about building an advanced, pervasive peer-to-peer network. Instead of circumventing the intermediary to move files, he’d get around the medallions, dispatchers, and operators—as well as those irksome government regulators—to move people.

In 2010, the taxi owner-driver-dispatch trifecta hadn’t evolved at all, even as technology had changed consumer expectations and behaviors. Hundreds of mobile apps had made paying for things easy and seamless, but cabs were stuck in the old cash-based system. Although drivers were required to take credit cards in most cities, the machines were often difficult to use or couldn’t make the connection back to the dispatcher. Drivers wanted cash tips, not credit card receipts—and so they would discourage passengers from using the machines.

Uber-style payments started to change the consumer mindset. Why wasn’t every transaction that easy?

Uber was a very clever hack for paying with cash. Its payment gateway—the infrastructure that works securely between the passenger’s phone and Uber—uses client-side encryption written in a mobile language. Which means that rather than the passenger having to enter her credit card information again and again, or having to load slow web pages onto her mobile device, the entire transaction happened lightning-quick in the background. This and other advanced technology made the Uber transaction invisible—once a ride was finished, the passenger was simply free to leave the car.

No one had ever before launched such a seamless mobile payment interface. This wasn’t a simple update to the cash transaction—it was a creative solution to an experience that had long frustrated riders throughout the world. It was such a revelation that Uber-style payments started to change the consumer mindset. Why wasn’t every transaction that easy?

Uber totally upended established payment practices. And the technology platform was so good that when the company introduced its so-called surge pricing, in which fares can be multiplied anywhere from 1.2 to 10 times the usual price during peak demand, Uber’s business actually continued to grow. Think about the practical implications of surge pricing for a moment. If a regular taxicab changed its rates throughout the day, such that a short ride to the airport could range in price from $30 to $300, most people would look for another alternative.

Attendees at the 2016 Consumer Electronics Show in Las Vegas, where regulated taxis are already scarce, railed against Uber on social media. With an estimated 170,000 people in town for the convention, Uber invoked surge pricing of five to six times the usual rate, and it alerted users when they opened the app. Throughout the week, there were hundreds of Tweets, Facebook posts, and Instagrams about how Uber was unfairly charging people. But many of those posts included screenshots of time-stamped, paid receipts.

We embrace Uber even when it’s bad for us, because the technology—on-demand service, widely available drivers, seamless payments—is too good to pass up.

Zooming in and out, we can see the pattern emerge. Uber had created a rich, complex pool of opportunities, solving for the customer experience problem and—though they might not recognize it as such—for the taxicab owners’ outdated technology and the regulators’ restrictive business model. “We didn’t dream with [Kalanick] about what it could be, that it could transform transportation,” said Alfred Lin, a partner at Sequoia Capital, which funded Uber.

Indeed, it becomes clear that Uber’s promise wasn’t a well-designed mobile app. Uber had a certain x-factor—a set of qualities that was special and significant. If an x-factor wasn’t in play, then the copycat apps launched by the taxicab industry itself, such as Hailo, would have found big, captive audiences. To date, the industry has not been able to replicate Uber’s success. It hasn’t even come close.

There are too many problems with the “Uber for X” position for it to survive as a trend. Those 526 companies calling themselves the “Uber for” makeup, laundry, private jets, ice cream, massages, and flowers will inevitably go the way of Gilt, Zulily, and One Kings Lane during the “flash sale for x” trend a few years ago. Actually, that’s not quite right: few (if any) will ever come close to achieving unicorn status. Most will go under, just as we begin hearing that siren call, tantalizing us with the next buzzy-sounding “Tech Thing for X” catchphrase.

Reprinted with permission fromThe Signals Are Talking by Amy Webb. Copyright 2016 by PublicAffairs, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc.

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• Hype
• on-demand economy
• Startups
• Uber